Buying extra property to extend

I read the article in Paddocks Press to be found at Do I have to buy extra common property to extend my section? with great interest and I beg to differ. Even though, from a registration point of view, it makes no difference, I always deemed the preliminary process of arriving at a point where the documentation can be lodged in the deeds office, and as practised by all conveyancers, lacking, even when I was at the deeds office.

In my opinion the misconception really is that only where a portion of the common property is to be alienated can one speak about alienation of common property. That giving common property to an owner of a unit in a scheme who wishes to extend his unit for free does not qualify as alienation of common property. To my mind this is eminently wrong.

Let me explain my point of view.

1. Section 17(1) of Sectional Titles Act (STA) states as follows:

“17. Alienation and letting of common property.—(1) The owners and holders of a right of extension contemplated in section 25 may, if authorised in terms of section 5 (1) (a) of the Sectional Titles Schemes Management Act direct the body corporate on their behalf to alienate common property or any part thereof, or to let common property or any part thereof under a lease, and thereupon the body corporate shall notwithstanding any provisions of section 20 of the Deeds Registries Act, but subject to compliance with any law relating to the subdivision of land or to the letting of a part of land, as the case may be, have power to deal with such common property or such part thereof in accordance with the direction, and to execute any deed required for the purpose:…”

i) The section calls for authorisation as per section 5(1)(a) of Sectional Titles Schemes Management Act (STMA), which is a unanimous resolution. It is inconceivable that an action that affects the rights of every single owner of a unit in the scheme adversely can be done on the basis of a special resolution, unless and even if the acts allows that. Keep in mind that every other owner’s PQ will diminish, whereas the PQ of the owner who is extending his unit will be increased;

ii) The special resolution referred to in section 24(3) of STA authorises the lodging of a draft sectional plan with the SG and goes hand in hand with section 5(1)(h) of STMA: “….cause the land surveyor or architect concerned to submit a draft sectional plan of the extension to the Surveyor-General for approval….”

It does not authorise the dealing with common property per se, only the authority to lodge the draft plan;

iii) The section does not only deal with alienation of common property, but also with letting, which is not alienation;

iv) The section provides for alienation of part of the common property, not just a portion, but specifically provides for the compliance with the laws relating to subdivision or the letting of land should it apply;

v) The section requires that the unanimous resolution make a direction as to how the common property should be dealt with. So does section 5(1)(a) of STMA. What direction could that be? That the part of the common property be allocated to MR X who may extend his unit onto such common property as well as the price he has to pay for the part of the common property?

vi) The section provides further, as does section 5(1)(a) of STMA, that the body corporate may “…execute any deed required for the purpose….” That implies clearly that there may be instances where a deed is not required, such as when the common property is allocated to someone for the purpose of extending his unit and cannot in fact be transferred by means of a deed of transfer;

vii) Note that section 5(1)(a) of STMA is made subject to compliance with section 17(1) of STA when dealing with the common property;

viii) Most importantly, note the words “…notwithstanding the provisions of section 20 of the Deeds Registries Act….” Which means implicitly that a deed of transfer is not a necessity.

2. To say that there is nothing in the STA that calls for additional land to be purchased by an owner is correct. But why should it be given away? That is what seems to be the current position and it makes no sense at all! The body corporate is meant to act in the best interest of all owners of units in the scheme. Giving common property away to one owner to the detriment of the other owners of units hardly seems to be in line with that obligation.

i) If you consider what I said in 1) above, that does not seem correct. The act does not say that the additional common property that will form a part of the owner who is extending his unit must be sold to him in so many words but the authority for selling the additional common property to an owner who wishes to extend his unit is clearly there;

ii) The Commissioner for Inland Revenue ruled that an extension of a unit attracts transfer duty. (see Registrar’s Conference Resolutions 40/1989 and 64/2010) That can only be because ownership in property is transferred, whether it is achieved by way of a transaction as defined in the Transfer Duty Act or by some other way than a transaction. (see Transfer Duty Guide p37);

iii) The special resolution referred to in section 24(3) of STA clearly cannot form an instrument of alienation. It is clearly not meant for that purpose as it only authorises the lodgement of a draft sectional plan. A unanimous resolution passed in terms of section 5(1)(a) of STMA may serve that purpose, or it may direct the body corporate to enter into a deed of sale with the owner of the unit to be extended and it may determine the price to be paid for the part of the common property being alienated to the owner of that owner.

Apologies to Paddocks for sending this to GhostDigest instead of mailing it as a reply to their article on their web site, but I thought, maybe mistakenly, to reach a bigger audience and at the same time also giving their site some more exposure as I hope that whoever reads this will refer to Mr Kelly’s article as well.

Dudley Lee